Australia's productivity challenge is increasingly becoming a boardroom issue. At our recent Challenges for Boards webinar, panellists explored how regulation, investment confidence, AI adoption and policy uncertainty are shaping organisational performance and long-term competitiveness.
Panellists:
- Tim Bednall, Partner and Head of Corporate Governance, Mallesons
- Carol Austin, Director Infoxchange and O’Connell Street Associates
- Graham Bradley, Chairman, Infrastructure NSW and Director, O’Connell Street Associates
- Stephen Loosley, Director, O’Connell Street Associates
- Annabel Griffin, Partner, Mallesons
- Meredith Paynter, Partner, Mallesons
- Kai-Chen Lamb, Partner, Mallesons
Key insights:
Productivity is becoming impossible for boards to ignore
- Productivity is increasingly becoming a board-level issue, rather than solely a matter for governments and policymakers.
- Current productivity growth is sitting at 0.4% per year, the weakest in ~60 years (PC, Feb 2026). Weak productivity growth is affecting business performance, investment decisions, living standards and Australia's competitiveness.
- Boards are seeing the impact through slower growth, rising costs, workforce pressures and increasing expectations around technology adoption.
- Concerns about productivity have intensified as the operating environment becomes more challenging.
- Directors should consider productivity as a key factor in long-term growth, profitability and organisational resilience.
Regulation continues to be viewed as a significant drag on productivity
- Panellists identified regulatory burden as a significant constraint on organisational productivity.
- Board time spent on compliance has doubled over the past decade, from 24% to 55% (AICD/Mandala, 2025). The challenge is not only the direct cost of compliance, but also the opportunity cost associated with management and board attention being diverted from strategic priorities.
- Increasing regulatory obligations can reduce the time available for innovation, investment and long-term value creation.
- Concerns were raised about the cumulative effect of regulatory layering, including approval delays, overlapping regulatory requirements and increasing project costs.
Boards are increasingly focused on AI as a productivity lever
- AI was identified as one of the most significant opportunities available to organisations seeking productivity improvements.
- Boards are increasingly viewing AI as a strategic capability rather than a standalone technology project.
- According to Mallesons' Directions survey, implementing and extracting value from AI is both the leading short- and medium-term business priority.
- Many organisations remain in the experimentation phase as they seek to identify and capture value from AI initiatives.
- Directors must balance the pursuit of productivity gains with appropriate governance of data, cybersecurity, legal and operational risks.
- Inaction may itself represent a governance risk if competitors successfully embed AI into their operations.
Investment confidence and productivity remain closely connected
- Sustained productivity growth requires ongoing investment.
- Regulatory complexity, approval delays and policy uncertainty can reduce business confidence and discourage capital investment.
- Lower investment levels can constrain innovation, growth and competitiveness.
- The recent Federal Budget provided tax incentives for innovation and venture capital start-ups, however CGT reform was implemented with little feedback from the business community. Some panellists believe investment in Australia was disincentivised by the most recent Budget.
- We cannot rely on superannuation sector to fund the pool of capital needed for productivity.
- Capital allocation is an increasingly important board consideration.
- Directors should consider whether existing governance settings appropriately support investment in future growth and productivity-enhancing initiatives.
Boards may need to become more active participants in the productivity debate
- There is a growing gap between reviews and recommendations on the one hand, and practical reform outcomes on the other.
- As productivity challenges increasingly affect business performance, investment and shareholder value, boards may wish to engage more actively in policy and reform discussions.
- Business has an important role to play in identifying practical reforms and providing insight into how regulation operates in practice.
The debate has shifted from identifying the problem to delivering reform
- The challenge is no longer identifying productivity issues, but implementing meaningful reform.
- Several panellists drew parallels with Australia's reform agenda of the 1980s and argued that a similar level of ambition may be required to address today's productivity challenges.
- Effective reform will require leadership, accountability and collaboration across government, business and the broader community.
- A recurring theme was the need for productivity champions across government, business and the union movement who can advocate for reform, build consensus and maintain momentum through the implementation process.
- Greater business involvement in identifying reform priorities and designing practical solutions was seen as an important part of achieving lasting productivity improvements.
- Boards should consider the role they can play, both within their organisations and through industry engagement, in supporting initiatives that improve productivity and economic growth.
A question every board should be asking
The webinar concluded with a practical challenge for directors. Boards devote significant attention to financial reporting, risk management and compliance obligations. Yet, as one panellist observed, organisations do not always apply the same discipline to measuring productivity itself. As productivity becomes a defining challenge for Australian businesses, boards may wish to ask a simple question: how does management define, measure and improve productivity across the organisation?
